- Mexico was the location of advanced Amerindian civilizations such as the Aztecs and the Mayas be Environmental Risk Outlook:
- Flooding and deforestation are two of the issues that have raised environmental risk levels to their current state
MEXICO:Demographic Risk Outlook:
- Demographic risk levels are at their highest level in decades due to large-scale emigration and the high birth rate.
ore the Spanish gained control of the territory in the 16th century.
- After gaining its independence in the early 19th century, Mexico lost much of its territory to the United States in the 1840s.
- The Institutional Revolutionary Party (PRI) has been the dominant political party in Mexico for much of the past 110 years.
- Mexico’s economy has greatly benefited from its membership in the North American Free Trade Agreement (NAFTA), but the lack of economic reform is threatening future growth.
- Most of Mexico’s recent economic growth has occurred in the north of the country, creating a large divide in terms of wealth between northern and southern Mexico.
Key Facts and Data:
- Official Name – United Mexican States
- Capital – Mexico City
- Government Type – Federal republic
- Head of State and Government – President Enrique Pena Nieto (since 2012)
- Population – 124,575,000
- Land Area – 1,923,040 sq. km
- Total GDP (US$) – $1,047 billion
- Per Capita GDP at PPP (US$) – $18,938
- Currency – Mexican peso
Table of Contents
- Recent Political Events
- Recent Economic Events
- Other Recent Events
- Overview of the Current Government
- Leadership Profile
- Summary of the Most Recent Elections
- Leading Political Parties
- Forecast for the Next Elections
- International Relations Outlook
- Potential Conflicts
- Military Capabilities
- Key Political Issues
- Political Risk Outlook
- Economic Overview
- GDP Growth Forecasts
- Key Sector Forecasts
- Inflation Forecasts
- Foreign Trade Forecasts
- Foreign Investment Forecasts
- Exchange Rate Forecasts
- Outlook for Key Sector
- Key Economic Issues
- Economic Risk Outlook
Demographic & Environmental Outlook
- Population Overview
- Population Characteristics
- Development of Leading Urban Centers
- Key Demographic Issue
- Topography and Climate Overview
- Environmental Threat Summary
- Key Environmental Issues
- Demographic and Environmental Risk Outlook
Current Events and Recent Changes Overview
Mexico: Recent Political Events and Changes
Key Political Events and Changes:
- In April 2018, United States President Donald Trump ordered US armed forces to be stationed along the US’ border with Mexico.
- The left-wing candidate in this year’s presidential election, Andres Manuel Lopez Obrador, continued to hold a lead in the polls ahead of July 2018’s election. According to polls taken in mid-2018, Mr. Lopez Obrador now has the support of 42% of Mexican voters. His main rival, the centrist Ricardo Anaya was at 33% in these polls, while the candidate of the ruling PRI party, Jose Antonio Meade, languished in a distant third place with just 19% support.
- Mr. Lopez Obrador announced that, if he wins this year’s presidential election, he will hold a referendum on his performance every two years. Moreover, if voters disapproved of his performance, he would resign.
- As Mexico’s murder rate continued to rise to record levels, the issue or crime emerged as a decisive issue in this year’s presidential election campaign. The frontrunner, Andres Manuel Lopez Obrador, proposed offering an amnesty to low-level criminals and drug traffickers as a way to reduce the murder rate in his country.
Mexico: Recent Economic Events and Changes
Key Economic Events and Changes:
- The Mexican economy expanded by a disappointing 1.2% on a year-on-year basis in the first quarter of this year, the lowest rate of growth in Mexico in more than four years. Nevertheless, an improved performance by the country’s service sector and an improving outlook for the country’s natural resources sector raised hopes that growth rates would trend upwards in the coming months.
- High-ranking trade officials from the United States, Canada and Mexico met in May 2018 for the latest round of negotiations on the future of the North American Free Trade Agreement (NAFTA).
- Canada and Mexico were exempted from the United States’ new 25% tariff on steel imports and 10% tariff on aluminum imports.
- Mexico signed a new trade agreement with the European Union in April 2018.
- Mexico’s inflation rate fell to 4.6% year-on-year in April 2018.
- Mexico’s unemployment rate fell to just 2.9% in March 2018.
Mexico: Other Recent Events and Changes
Other Key Events and Changes:
- There were 25,339 murders in Mexico in 2017, the highest recorded number of murders in the country’s recent history. This was an increase of nearly 25% over the number of murders in Mexico in 2016. As a result, crime is certain to be one of the leading issues in this year’s presidential election.
- The number of people arrested attempting to cross the US-Mexican border fell to its lowest level in 46 years in 2017.
Mexico Political Outlook
Mexico: Current Government
- Enrique Pena Nieto was sworn in as president of Mexico in December 2012 after winning the previous summer’s presidential election.
- Finance Minister Luis Videgaray resigned in September 2016 after he came under intense criticism for his role in pushing for, and organizing, a meeting between Mexican Enrique Pena Nieto and the (at that time) US presidential candidate Donald Trump earlier that month. He was replaced by Social Development Minister Jose Antonio Meade.
- President Pena Nieto reshuffled his cabinet in January 2017. The most notable move was the appointment of former Finance Minister Luis Videgaray as the new foreign minister. He had been sacked from his previous position just a few months earlier for his role in inviting Donald Trump to meet President Pena Nieto during the US presidential election campaign.
Key Members of the Government:
- Head of State and Government – Enrique Pena Nieto
- Secretary of Foreign Relations – Luis Videgaray
- Secretary of Finance – Jose Antonio Gonzalez
- Attorney General – Raul Cervantes
- Secretary of the Economy – Ildefonso Guajardo
- Secretary of Defense – Salvador Cienfuegos
- Secretary of Labor – Roberto Rafael Campa
- Secretary of the Interior – Alfonso Navarrete
Profile of President Enrique Pena Nieto
President Enrique Pena Nieto took office in December 2012 after winning that year’s presidential election, which returned the PRI party to the presidency for the first time in 12 years. • Prior to becoming president, Mr. Pena Nieto served six years as the governor of the state of Mexico, were his popularity soared.
- Earlier, he rose through the ranks of the PRI, having joined the party in the 1980s.
Key Policies and Stances:
In contrast to his predecessors, President Pena Nieto has focused his efforts on reducing crime, rather than declaring a war against Mexico’s drug gangs.
- In addition, he has championed the creation of a national police force as part of his efforts to centralize Mexico’s security forces.
Despite the history of the PRI, President Pena Nieto pushed for Mexico to become more open to foreign investment in order to boost the country’s exports.
- In particular, President Pena Nieto has called for foreign investment to be the catalyst for a much needed boost to Mexico’s moribund oil and gas industry.
Mexico’s Leading Political Forces: Institutional Revolutionary Party (PRI)
The PRI utterly dominated Mexican politics between 1929 and 2000.
- After a 12 year break, the PRI regained the presidency in 2012 when Enrique Pena Nieto was victorious in that year’s presidential election.
- The PRI also maintains a very strong presence in state and local governments in most areas of Mexico.
Key Policies and Stances:
- The PRI has embraced more statist economic policies over the past decade.
- The PRI has moved in recent years to support more government control over strategic areas of the country’s economy.
- The party has also played to Mexican nationalist sentiment, especially with regards to Mexico’s relations with the United States.
The PRI was able to maintain a massive political organization when it was out of power and that played a key role in the party’s recovery in recent years.
- The performance of the Mexican economy and the country’s ongoing drug war will determine if the PRI can maintain its level of support in the coming years.
Mexico’s Leading Political Forces:
National Action Party (PAN)
The PAN lost its control of the presidency in 2012 after 12 years in power.
- The PAN was damaged by the drug war that claimed tens of thousands of lives in Mexico.
- Moreover, the party struggled to make inroads at a state and local level
Key Policies and Stances:
- The PAN led the fight against drugs and corruption in Mexico, although the results of this effort were mixed at best.
- The PAN is generally a free-market party with high levels of support among the upper middle class in Mexico.
- Populist tendencies have often been noted during the PAN’s attempt to attack the PRI and the PRD.
The PAN party must reinvent itself as an opposition party in order to rebound its recent electoral defeats.
- However, the party must return to its free market roots in order to carve out a large niche in Mexican politics.
Mexico’s Leading Political Forces:
Party of the Democratic Revolution (PRD)
The PRD was formed in 1989 by left-leaning groups opposed to the PRI.
- The party was founded by Cuauhtémoc Cárdenas, who many feel was robbed of the 1988 presidential election.
- The current leader of the party is Mexico City’s popular mayor, Andrés Manuel López Obrador, who finished in second place in the 2006 and 2012 presidential elections.
Key Policies and Stances:
- The party is the easily most left-leaning of Mexico’s three leading parties.
- The party favors a renegotiation of the NAFTA treaty with the United States and Canada.
Andres Manuel Lopez Obrador’s refusal to accept defeat in the past two presidential elections had cost the PRD some of its support.
- Nevertheless, the PRD has emerged as the unquestioned leader of Mexico’s political left, a position that should allow the party to remain a leading player in Mexican politics for many years to come.
Mexico: International Relations Outlook
Key International Disputes:
- Mexico’s international affairs are dominated by the country’s relationship with the United States, which has deteriorated of late.
- If relative power between the two countries were more equal, there would likely be a strong movement within Mexico for the reclamation of lands lost to the United States in 1848.
International Relations Outlook:
- Mexico will continue to push for tight relations among North and Central American countries in the fields of trade and regional integration.
Political Risk Outlook:
- The high level of drug-related violence in recent years has led to a major increase in the risk of internal conflict and a deterioration of centralized authority in Mexico.
- In some areas of Mexico, political risk levels are now as high as almost any other country in Latin America, while other areas of the country remain quite stable.
Mexico Economic Outlook
Mexico: Economic Overview
Mexico has become one of the leading exporting emerging markets in the world.
- With North America the only developed region in the world expecting long-term population growth, Mexico is well positioned for future growth.
- However, Mexico has failed in many respects to take advantage of this favorable position, with growth rates that have disappointed in recent years.
Manufacturing and oil exports remain the keys to economic growth in Mexico.
- Mexico’s recent economic performance has mirrored that of the United States economy due to the country’s dependence upon the US export market.
- Long-term prospects remain relatively favorable as the US and Canadian markets are expected to grow faster than most other developed export markets.
- Nevertheless, Mexico needs to do a better job with regards to diversifying its economy and attracting more foreign investment.
Key Wealth-Related Issues and Trends
Mexico’s per capita GDP levels are well behind the United States and Canada, but well ahead of Central America.
Wealth levels have grown at a faster rate over the past two decades than in previous decades.
There is a growing wealth gap between the fast-growing regions of northern Mexico and its poorer south.
Access to the North American market has been the catalyst for improving living standards and wealth levels for many Mexicans. However, this improvement has been very uneven, with some areas of the country seeing wealth growth stagnate at quite low levels.
Mexico: GDP Growth Outlook
- Over the past five years, the Mexican economy has expanded by an average of just two percent per year.
- Lower oil prices and weaker-than-expected export growth have held back the Mexican economy in recent years.
- Economic growth in the coming years will be adversely affected by Mexico’s worsening economic relationship with the Trump Administration in the United States.
- Meanwhile, Mexico will continue to trail other large emerging markets such as China and India in terms of economic growth in the years ahead.
Mexico: Key Economic Sector The Oil and Gas Industry
Mexico is the 10th-largest oil producer in the world.
- However, its proven reserves are only one-tenth of those of Saudi Arabia.
- Around half of Mexican oil in consumed domestically, while most of Mexico’s oil exports are bound for the United States.
- Most of Mexico’s oil is found in the Bay of Campeche, located to the west of the Yucatan peninsula.
PEMEX, the state-run oil company, is one of the world’s largest oil firms.
- Until 2015, it retained exclusive oil exploration and production rights in Mexico.
- In 2015, the government finally opened Mexico’s oil and gas industry to foreign investment.
Mexico’s oil reserves are being exhausted at a faster rate than most other major oil producing nations.
- Therefore, finding new reserves is imperative for Mexico’s oil and gas industry.
- As such, the ability to attract foreign investment will be the key to the future performance of Mexico’s oil and gas industry.
Mexico: Key Economic Sector
The Automotive Industry
Mexico has become one of the world’s leading automotive producers in recent decades.
- Foreign investment has been aimed at producing vehicles for export to the United States and Canada.
Mexico’s recent success is under threat as new competitors appear for exports to the United States and access to the US market is in peril.
- Major automotive companies are investing heavily in China, Brazil and the south-eastern United States, to the detriment of the Mexican automotive industry.
- In addition, the global automotive industry already suffers from massive overcapacity issues
Mexico’s automotive industry is touted as one of the country’s great success stories, but many hurdles are on the horizon.
- Global overcapacity will force auto companies to close existing factories, even as they invest heavily in places such as China.
- One bright spot for Mexico is that the North American market for cars and trucks will grow over the long-term.
Key Economic Issue in Mexico
The Benefits of NAFTA
Mexico’s position as the low-cost manufacturing export center within NAFTA gives it major long-term benefits.
- Among developed regions of the world, only North America has a relatively favorable demographic outlook in the coming decades.
- The population of the United States and Canada will continue to grow, as opposed to the populations of West Europe and Japan.
Mexico has failed, so far, to take advantages of the tremendous opportunities offered by its membership in NAFTA.
- Despite unique access to the vast North American market, Mexico’s economic performance since joining NAFTA has not been as good as expected.
- Moreover, rising protectionist sentiment in the United States is threatening the future of NAFTA.
NAFTA has proven to be a tremendous opportunity for the Mexican economy, even if the last few years have shown the risks of being over-exposed to a single export market. Nevertheless, the long-term outlook is favorable, thanks to the internal expansion of NAFTA’s potential market.
Mexico: Industrial Production Growth Outlook
- The recent economic recovery in the United States and Canada boosted many of Mexico’s leading industrial sectors
- Mexico’s industrial sector will remain dependent upon access to the markets of the United States and Canada.
- Higher levels of growth will return later in the forecast period, but foreign competition will keep the industrial sector from realizing its true potential.
Manufacturing Location Rankings by in Latin America
- With the exception of Mexico, Latin American countries have struggled to develop major manufacturing industries that continue to expand in the 21st century.
- A key problem facing the region is export competitiveness, due to poor infrastructures and a lack of access to key export markets.
- Latin America’s recent economic woes have stunted domestic market growth in the region, and this has hurt many of the region’s main manufacturing industries.
- Moreover, with the exception of Mexico, it is unlikely that the region will be able to develop competitive export- oriented manufacturing industries in the coming years.
Mexico: Inflation Outlook
- Inflation rates trended downwards in previous years following the earlier spike in food prices.
- However, the depreciation of peso in 2017 resulted in a major surge in inflationary pressures in Mexico.
- Inflation is forecast to trend downwards in the coming years, but the threat of future inflationary spikes will remain in place.
Mexico: Foreign Investment
Foreign Investment Climate:
Mexico is the leading location for foreign investment in the manufacturing sector for products destined for North America.
- The country’s proximity to the United States and its low labor costs have made it a major recipient of foreign investment over the past two decades.
Foreign investment levels in Mexico have held relatively steady over the past few years.
- While the manufacturing sector has received over half of the foreign investment in Mexico, the financial sector is also attracting interest from foreign parties.
Outlook For Future Foreign Investment:
Despite the fears of foreign investment being diverted to China, Brazil and other emerging market competitors, Mexico is well-placed to maintain its position as a leading FDI recipient.
- Nevertheless, the government must continue to fight for this foreign investment through the use of incentives and other means of attracting foreign companies to Mexico.
Fiscal Policy Overview
- Mexico’s fiscal deficit was above 3% of GDP between 2009 and 2015 as the government enacted major economic stimulus packages in a bid to pull Mexico out of a sharp downturn.
- However, this fiscal deficit shrunk rapidly over the past two years.
- Government spending levels will increase over the next few years as the government continues to spend in order to boost Mexico’s economic growth prospects.
Mexico: Labor Force
Labor Force Overview:
The rapid economic development of certain regions of Mexico has led to major labor migrations over the past two decades.
- In a number of sectors of the Mexican economy, labor shortages are becoming a major drag on growth.
- In addition, northern regions near the US border are facing the prospect of major labor shortages.
Unemployment rates in Mexico have trended downwards in recent years, and are now below 4%.
- This is a far cry from previous decades, when unemployment was a major thorn in the side of the Mexican economy
Outlook For the Labor Force:
Unemployment rates are forecast to remain relatively low over the course of the forecast period. • The longer-term outlook remains positive with job creation likely to grow for the foreseeable future, with the construction and service sectors expected to perform strongly.
Largest Companies in Mexico
Mexico’s largest domestic companies all have dominant positions on the Mexican market.
- Few of Mexico’s leading companies have major operations outside of Mexico.
- Service companies and conglomerates are easily the largest players in Mexico’s domestic economy.
Many foreign companies also have a large presence in Mexico.
- Companies from the United States are overwhelmingly the largest investors in Mexico.
- However, Asian and European companies have also established a significant presence in Mexico in recent years.n
Outlook for Domestic Companies:
Mexico’s remaining national champions will remain in domestic hands as long as progress towards economic reforms remains bogged down.
- Otherwise, foreign investors, mostly from the United States, will seek to continue to expand their presence in the market.
Forecast Assumptions and Risk
Near-Term Global Growth to Remain Stable The near-term forecast for the global economy calls for overall economic growth rates to remain near current levels, with developed economies continuing to grow faster than in previous years.
Mid-Term Economic Risk Levels to Rise A number of risks (share price corrections, Chinese debt, political gridlock) will rise to more dangerous levels by 2019, jeopardizing the recent run of steady growth for many large economies.
Asia Drives Global Growth Asian emerging markets, led by China, India and Southeast Asia, will generate nearly half of the world’s economic growth over the near- and midterm.
Crime Will Remain a Major Problem High crime rates will continue to plague some areas of Mexico, while spreading to other areas of the country. This will force the government to devote more resources to combating crime.
A Global Power Vacuum.Whether by design or due to internal political unrest, the United States’ ”America First” policies are resulting in power vacuums forming in many of the world’s most volatile regions.
Major Power Conflicts The risk of conflicts between large- and mid-sized powers is rising in the Middle East, Asia and East Europe, and any of these could have the scale needed to severely disrupt the global economy.
Slower Long-Term Growth in the US A prolonged period of slow economic growth in the United States would have major consequences for the Canadian economy.
Drug War Intensifies If Mexico’s drug wars were to worsen, more areas of the country would be destabilized and the country’s economy could be adversely impacted.
Mexico: Economic Risk Outlook
- After joining NAFTA, Mexico’s economic risk levels fell to some of the lowest levels of any major emerging market in the world.
- Mexico’s unique access to the giant United States market is a key factor in maintaining these low economic risk levels.
- Mexico’s improved export competitiveness in recent years has helped to lower some measures of economic risk.
Mexico Demographic and Environmental Outlook
Mexico is the most populous Spanish-speaking country in the world. Population growth has been rapid, despite large-scale emigration northwards to the United States in earlier decades. This population growth will continue, but thanks in a large part to NAFTA, the prospects for addition job growth in Mexico are favorable.
Composition of Mexico’s Population
Most Mexicans claim at least partial descent from the Amerindian groups that have populated Mexico for thousands of years.
- Most of these Mexicans are descendants of the Aztecs and the Mayas. Only a small number of modern-day Mexicans are purely of European descent.
Spanish is the official language of Mexico.
- Mexico is the largest Spanish-speaking country in the world by a wide margin. Nearly 100 Amerindian languages are currently spoken in Mexico.
- This is primarily as a second language to Spanish.
Despite its leading position, the Roman Catholic Church has lost a great deal of influence in Mexico in recent decades.
- The Mexican Revolution in the early 20th century signalled an end to the church’s power.
- Since then, Mexico has remained an officially secular country.
Mexico: Leading Urban Centers
- Mexico City is one of the world’s largest urban centers and many of Mexico’s other large cities are located near to the capital.
- Mexico also has a number of other significant cities, including Guadalajara and Monterrey.
- As much internal migration is heading northwards, cities such as Juarez and Tijuana continue to expand rapidly.
Key Demographic Issue in Mexico Emigration
Large-scale Mexican emigration to the United States began as officially sanctioned farm labor during and after World War Two.
- Between 1942 and 1962, 4.5 million Mexican workers left to work in the United States.
Following this period, more Mexicans began to emigrate, legally or otherwise, to the United States.
- By the 1990s, nearly 300,000 Mexicans were moving to the US each year.
Mexico has emerged as the dominant transit point for émigrés from Central America.
- Some stay in Mexico, but most move northwards.
In recent years, the rate of emigration from Mexico to the United States has fallen sharply.
- This is due to the fact that the US economy has been relatively sluggish in recent years, while job creation levels in Mexico have risen.
On one hand, emigration has served to alleviate the pressure on the Mexican job market. However, many of Mexico’s best educated people have been among the emigrants looking for higher-paying jobs north of the border. Nevertheless, continued economic expansion will continue to reduce emigration in the years ahead.
Mexico: Topography and Climate
Topography • Most of Mexico consists of a high plateau, with high mountain ranges on either side.
- These two mountain ranges join in southern Mexico, an area which contains numerous volcanoes.
- Along both coasts are narrow plains that descend from the mountains.
Climate • Mexico’s climate varies according to elevation.
- In the south, temperatures are very hot and the weather is generally quite humid.
- In contrast, the north is far more arid and temperatures are generally cooler, especially in the mountains
Key Environmental Issues:
Mexico has more species of reptiles than any other country on earth.
- Mexico is also one of the richest countries in terms of plant life.
- Also, many other types of wildlife live in Mexico.
Mexico City combines one of the world’s largest urban communities with a very unfavorable geographic setting.
- Industry and traffic in and around Mexico City contribute to the city’s poor air quality.
- The surrounding mountains do not let winds disperse this pollution outside of the city.
Many of the tropical rainforests that covered southern Mexico have been cleared for agricultural land.
- The Mexican government is expanding the amount of protected land in order to protect remaining forests.
- Population growth will encourage further agricultural expansion.
Key Geographic Issue in Mexico
Mexico is prone to many sorts of natural disasters, many of which have had a major impact on the country’s history.
- As part of the Pacific’ “Ring of Fire”, Mexico experiences many earthquakes and volcanic eruptions.
- Mexico City itself is located in an area with frequent earthquakes, as well as near a major volcano that could erupt in the near future.
- Meanwhile, many areas of the country are vulnerable to tropical storms, with many powerful hurricanes striking both coasts of Mexico in recent decades.
The likelihood of more natural disasters striking Mexico in the near future is very high. Moreover, the nightmare scenario of a major earthquake or volcanic eruption near Mexico City is a distinct possibility.
Mexico: Demographic and Environmental Risk Outlook
Demographic Risk Outlook:
- Social inequalities, crime and migration are all major demographic risks that hold the potential to destabilize Mexico.
Environmental Risk Outlook:
- Some areas of the country face little environmental risk, whereas places such as Mexico City faces some of the world’s highest levels of environmental risk.